Non-dollar markets welcome LatAm bond issuers
By Paul Kilby
NEW YORK, Oct 17 (IFR) - Latin American borrowers are eyeing a broad set of alternative funding options in non-dollar markets that are becoming increasingly receptive to the region's credits.
Yen, Aussie dollars and sukuk trades are all in the works, say bankers pitching issuers seeking to diversify away from a core US dollar market that has become increasingly volatile and could turn comparatively costly once the Fed hikes rates.
Japanese institutional investors, for example, are becoming more amenable to the idea of buying Latin American corporate and sovereign bonds after a decade-long rejection of anything but top-quality names.
"Japanese investors had been happy to buy Brazilian, Argentine and Mexican government bonds because they enjoyed the high coupon, but after the (first) Argentina default they stayed away from Latin American credits for more than a decade," said Takaomi Tahara, head of international debt syndicate at Nomura.
Rock-bottom yields on Japanese government bonds as well as on bonds issued by European banks in yen are forcing the country's buyside to rethink its views on the region and are likely to push it into the arms of issuers further down the credit spectrum.
"They have been investing in these European banks over the past couple of years, but some are now achieving yen offer swaps plus zero and some investors are not happy with Double A bank paper any more," said Tahara. "So they are looking at more attractive alternatives such as Latin American credits."
A greater acceptance of Triple B names opens the doors to a region that is still dominated by sub-Single A credits.